Shift From U.S. Dollar As
World Reserve Currency Underway – What Will This Mean for America?
Today, more than 60% of all foreign
currency reserves in the world are in U.S. dollars – but there are big changes
on the horizon…Some of the biggest economies on earth have been making
agreements with each other to move away from using the U.S. dollar in
international trade…[and this shift] is going to have massive implications
for the U.S. economy. [Let me explain what is underway.] Words: 1583 So says Michael T.
Snyder (www.theeconomiccollapseblog.com) in edited excerpts from
his original article* entitled 10 Reasons Why the Reign of the Dollar as the
World Reserve Currency I About to Come to an End.
[NOTE:
This post is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com
and the free Intelligence Report newsletter (see sample here
– register here). The article may have been edited ([ ]),
abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for
the sake of clarity and brevity to ensure a fast and easy read. This paragraph
must be included in any article re-posting to avoid copyright infringement.]
Snyder goes on to say, in part:
China has the second largest economy
on the face of the earth, and the size of the Chinese economy is projected to
pass the size of the U.S. economy by 2016 [and projected to become three times
larger than the U.S. economy by the year 2040 by at least one economist. [As
such,] China is sitting there and wondering why the U.S. dollar should
continue to be so preeminent if the Chinese economy is about to become the
number one economy on the planet.
China, and other emerging powers
such as Russia, have been quietly making agreements to move away from the U.S.
dollar in international trade over the past few years [and, as such,] the
supremacy of the U.S. dollar is not nearly as solid as most Americans believe
it to be.
As the U.S. economy continues to
fade, it is going to be really hard to argue that the U.S. dollar should
continue to function as the primary reserve currency of the world. Things are
rapidly changing, and most Americans have no idea where these trends are taking
us.
The following are 10 reasons why the
reign of the dollar as the world reserve currency is about to come to an end:
#1: China And Japan To Use Own
Currencies In Bilateral Trade
A few months ago, the second largest
economy on earth (China) and the third largest economy on earth (Japan) struck
a deal which will promote the use of their own currencies (rather than the U.S.
dollar) when trading with each other. This was an incredibly important
agreement that was virtually totally ignored by the U.S. media. The following
is from a BBC report about that agreement:
“China and Japan have unveiled plans
to promote direct exchange of their currencies in a bid to cut costs for
companies and boost bilateral trade. The deal will allow firms to convert the
Chinese and Japanese currencies directly into each other. Currently businesses
in both countries need to buy US dollars before converting them into the
desired currency, adding extra costs.”
#2: The BRICS Plan To Use Own
Currencies When Trading With Each Other
The BRICS continue to flex their
muscles. A new agreement will promote the use of their own national currencies
when trading with each other rather than the U.S. dollar. The following is from
a news source in India:
“The five major emerging economies
of BRICS — Brazil, Russia, India, China and South Africa — are set to inject
greater economic momentum into their grouping by signing two pacts for
promoting intra-BRICS trade…The two agreements will enable credit facility in
local currency for businesses of BRICS countries…[which is] expected to scale
up intra-BRICS trade that has been growing at the rate of 28% over the
last few years but, at $230 billion, remains much below the potential of the
five economic powerhouses.”
#3: China and Russia Use Own
Currencies In Bilateral Trade
Leaders from both Russia and China
have been strongly advocating for a new global reserve currency for several
years, and both nations seem determined to break the power that the U.S. dollar
has over international trade. [In fact,] Russia and China have been using their
own national currencies when trading with each other for more than a year now.
#4: Use Of Chinese Currency
Growing In Africa
Who do you think is Africa’s biggest
trading partner? It isn’t the United States. In 2009, China became Africa’s
biggest trading partner, and China is now aggressively seeking to expand the
use of Chinese currency on that continent.
A report from Africa’s largest bank,
Standard Bank, recently stated the following:
“We expect at least $100 billion
(about R768 billion) in Sino-African trade…to be settled in the renminbi by
2015.”
China seems absolutely determined to
change the way that international trade is done. At this point, approximately
70,000 Chinese companies are using Chinese currency in cross-border
transactions.
#5: China and United Arab Emirates
To Use Own Currencies In Bilateral Trade
China and the United Arab Emirates
have agreed to ditch the U.S. dollar and use their own currencies in oil
transactions with each other.
The UAE is a fairly small player,
but this is definitely a threat to the petrodollar system. What will happen to
the petrodollar if other oil producing countries in the Middle East follow
suit?
#6: India To Use Gold To Buy Oil
From Iran
Iran has been one of the most
aggressive nations when it comes to moving away from the U.S. dollar in
international trade. For example, it has been reported that India will begin to
use gold to buy oil from Iran.
#7: Saudi Arabia Likely to
Abandon Use of Petrodollar in Dealings With China
Who imports the most oil from Saudi
Arabia? It is not the United States, it is China…Saudi Arabia and China have
teamed up to construct a massive new oil refinery in Saudi Arabia…so how long
is Saudi Arabia going to stick with the petrodollar if China is their most
important customer?
#8: The United
Nations Continues to Push For A New World Reserve Currency
The United Nations has been issuing
reports that openly call for an alternative to the U.S. dollar as the reserve
currency of the world. In particular, one UN report envisions “a new global
reserve system…that no longer relies on the United States dollar as the single
major reserve currency.”
#9: The IMF Has Been Pushing For A
New World Reserve Currency
The International Monetary Fund has
also published a series of reports calling for the U.S. dollar to be replaced
as the reserve currency of the world. In particular, one IMF paper entitled
“Reserve Accumulation and International Monetary Stability” actually proposed
that a future global currency be named the “Bancor” and that a future global
central bank could be put in charge of issuing it….
“A global currency, bancor, issued
by a global central bank (see Supplement 1, section V) would be designed as a stable
store of value that is not tied exclusively to the conditions of any particular
economy. As trade and finance continue to grow rapidly and global integration
increases, the importance of this broader perspective is expected to continue
growing.”
#10: Most Of The Rest Of The World
Hates The United States
Global sentiment toward the United
States has dramatically shifted, and this should not be underestimated. Decades
ago, we were one of the most loved nations on earth [but] bow we are one of the
most hated. If you doubt this, just do some international traveling. Even in
Europe (where we are supposed to have friends), Americans are treated like
dirt. Many American travelers have resorted to wearing Canadian pins so that
they will not be treated like garbage while traveling over there.
If the rest of the world still loved
us, they would probably be glad to continue using the U.S. dollar but because
we are now so unpopular, that gives other nations even more incentive to dump
the dollar in international trade.
What will happen if the U.S.
dollar’s reign as the world reserve currency comes to an end?
The demise of the dollar will also
bring radical changes to the American lifestyle. When this economic tsunami
hits America, it will make the 2008 recession and its aftermath look like no
more than a slight bump in the road. It will bring very undesirable changes to
the American lifestyle through:
1. massive inflation,
2. high interest rates on mortgages
and cars,
3. substantial increases in the cost
of food, clothing and gasoline and
4. a much harder time financing its
debt. Right now, there is a huge demand for U.S. dollars and for U.S.
government debt since countries around the world have to keep huge reserves of
U.S. currency lying around for the sake of international trade but what if… the
appetite for U.S. dollars and U.S. debt dried up dramatically? That is
something to think about.
Conclusion
At the moment, the global financial
system is centered on the United States but that will not always be the case.
The things talked about in this article will not happen overnight, but it is
important to note that these changes are picking up steam. Under the right
conditions, a shift in momentum can become a landslide or an avalanche.
Clearly, the conditions are right
for a significant move away from the U.S. dollar in international trade. When
will this major shift occur? Only time will tell.
(Editor’s
Note: The author’s views and conclusions in the above article are unaltered and
no personal comments have been included to maintain the integrity of the original
post. Furthermore, the views, conclusions and any recommendations offered in
this article are not to be construed as an endorsement of such by the editor.)
*http://theeconomiccollapseblog.com/archives/10-reasons-why-the-reign-of-the-dollar-as-the-world-reserve-currency-is-about-to-come-to-an-end
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Those in the U.S. power structure
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Within the recent retracement of the
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dollar as the world’s primary reserve currency. Moreover, there has even been
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future but any case made for the vulnerability of the dollar falls short when
it comes to naming alternatives. Words: 631
I came to the conclusion several
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